Texas Passes 2011 Tort Reform
Texas’ latest round of tort reform, the highly publicized and politicized H.B. 274, was signed into law on May 30, 2011. H.B. 274 contains a number of judicial reforms that will have a significant impact on litigation in Texas when it comes into effect this September. Changes include:
- the creation of a motion to dismiss for meritless suits that have no basis in law or fact
- the adoption of “loser pays” provisions for motions to dismiss
- the creation of rules to expedite civil actions where the amount in controversy is less than $100,000
- amendments granting trial courts greater discretion concerning appeals on controlling issues of law
- amendments to the offer-of-settlement rules
- amendments in the designation of responsible third parties
H.B. 274 mandates the Texas Supreme Court to adopt rules similar to the federal rules allowing for the early dismissal of meritless suits when they have no basis in law or fact. Prior to H.B. 274, if a plaintiff’s claim was not permitted by law, a defendant’s remedies were limited to filing special exceptions and a motion to dismiss or filing a no-evidence motion for summary judgment after an adequate time for discovery had passed.
It will be interesting to see what form the new rules take when they are developed this fall. Although early versions of H.B. 274 required the Supreme Court to model the new rules off of the Federal Rules of Civil Procedure, the final version does not. If the new rules mirror the federal standard, specifically Federal Rule of Civil Procedure 12(b)(6) which requires dismissal of cases for failure to state a claim upon which relief can be granted, they will in essence do away with Texas’ current general pleading system. Development of such rules would require plaintiffs to file specific pleadings prior to discovery in order to avoid dismissal of their claims. It is unlikely that the Texas Supreme Court will develop rules that would do away with the general pleading standard. It is more probable that the new rules will involve modest changes in the current Texas Rules in order to accommodate the general pleading standard.
We anticipate this rule will not significantly impact medical malpractice litigation because of the highly stringent requirements already placed on plaintiffs by Chapter 74 in order for plaintiffs to maintain a health care liability suit. Presumably, Chapter 74 would prevail over any new but more lenient rules which would apply to other types of lawsuits. Health care defendants facing non-health care liability claims might benefit from having rules allowing for earlier dismissal of non-meritorious claims.
H.B. 274 also amends the Civil Practice and Remedies Code regarding the allocation of litigation costs and injects a “loser pays” provision into the dismissal process. The new rules provide that when cases that have no basis in fact or law are dismissed, the court shall award, in whole or in part, costs and reasonable and necessary attorney’s fees to the prevailing party. In other words, if an individual brings a lawsuit that has no basis in law or fact, the party may be liable for the opposing party’s attorney’s fees. While an excellent rule in theory, it is unlikely this rule will benefit a prevailing health care defendant as more often than not the plaintiff does not have the financial means to pay such fees.
Perhaps the greatest impact of H.B. 274 comes in the form of amendments to the designation of third parties. H.B. 274 repeals section 33.004(e) of the Texas Civil Practice & Remedies Code and adds a new section 33.004(d). Plaintiffs are no longer allowed to join a third-party defendant beyond the statute of limitations period. Defendants will also be barred from designating responsible third parties beyond the statute of limitations period if they failed to comply with their obligations to timely disclose that the person may be designated as a responsible third party. As we approach the effective date of H.B. 274 (September 1, 2011), defense attorneys in Texas would be well advised to disclose any undisclosed potential responsible third parties as a person that may be designated as a responsible third party in any pending cases where the statute of limitations will soon run.
H.B. 274 also: mandates that the Texas Supreme Court develop rules that will expedite civil cases with amounts in controversy of less than $100,000; grants trial courts greater discretion to permit appeals on orders that are not otherwise appealable; and makes changes to the caps imposed via the offer-of-settlement rules.
Gregory W. Marcum and Leah A. Greene will be giving a detailed presentation on the amendments contained in H.B. 274 at the Greater Houston Society for Healthcare Risk Management’s (GHSHRM) August luncheon.
The full text of the Bill as passed can be found at http://www.capitol.state.tx.us/tlodocs/82R/billtext/pdf/H.B.00274F.pdf#navpanes=0.
More details about the impact of H.B. 274 on third party practice can be found here.